The fact that you take that as an axiom is frightening. Moderate deflation is no more scary than moderate inflation, and the idea that an "overall inflation rate" determines people's behavior is laughably wrong.

I mean, which of the thousands of inflation rate definitions are you talking about? The FRED database tracks 34,000 different series of some 10,000 inflation measures. More importantly, people don't sense overall inflation at all, they make decisions on domain specific inflation. Prices dropping for farm equipment or homes does not mean businesses stop buying computers and homes stop buying washing machines. It is entirely possible for housing prices to tank while prices for nearly everything else increase...in fact, we've already seen it happen.

Think about what you are proposing: you're saying that even if prices are irrational and we are in a bubble, the only response is to maintain those irrational prices for that bubbled item and inflate everything else until we reach equilibrium. That is insane. If we did that, we'd still be trying to catch up with railway mania. And it puts us at far more of a risk of runaway inflation problems than letting housing prices drop would ever put us at a risk of a deflationary spiral.

It's time to start questioning your axioms. Don't get me wrong, there are plenty of blowhard macroeconomists out there that share the idea, but there are far more economists that have far more nuanced views and understanding of inflation and how it really affects people's behavior, and it is nowhere near axiomatic.